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18 Jan 05. The FT reported that Denis Ranque, chairman and chief executive of Thales, is expecting to meet EADS this year to discuss a possible link-up with the aerospace group.

Speaking at his traditional new year trading update, Mr Ranque said that he and Noël Forgeard, co-chief executive designate of EADS, would almost certainly meet this year. Any outcome however, he said, “would depend on the conditions and, for us, on the alternatives we have”.

Mr Ranque said he expected the European defence industry to change in 2005, and that Thales would play a role in reshaping it. He reiterated that whatever the result of talks with EADS, he favoured links that “strengthened Thales, not dismantled it”. This was a clear reference to unofficial proposals late last year that two Thales shareholders – Alcatel and Dassault, with a combined 15.3 per cent – would receive certain assets in return for backing an EADS bid.

The French government-backed proposals last year to merge Thales and EADS sparked fierce opposition from the defence electronics group’s key customers, including the UK Ministry of Defence and the aeronautics group’s German shareholder, DaimlerChrysler.Nevertheless, since Mr Forgeard emerged as the victor in a bruising battle for leadership of EADS, he has made no secret of his ambition to take over Thales. Mr Forgeard is due to take up his post in May and has said a deal with Thales, 32 per cent-owned by the French government, is on his agenda for EADS in 2005.

Yesterday Mr Ranque said Thales, having reduced debt significantly, was now ready to consider acquisitions, without giving details. He said discussions about a link with DCN, the state-owned shipbuilder, were going well. Mr Ranque also gave a bullish update on trading for 2004, which he said would see profits and margins ahead of 2003. “The margin was 6.6 per cent in 2003. There was an improvement in 2004,” he said. Thales would continue to make progress in its main markets this year, he added.

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